It’s easy to assume that residential and commercial property title insurance are the same, but that is not the case. The truth is the types of property involved in residential real estate transactions are very different from those involved in commercial real estate transactions, so the needs and purposes of title insurance are different as well. While of course they overlap to some degree, here’s a look at the primary differences between the two.
Residential versus commercial property title insurance: understanding what differs
For both residential and commercial property buyers, title insurance is an important, even an essential purchase, to ensure they are able to use the property as they intend. So whether you want to put up a fence in the backyard of your dream home or expand your commercial property on the accompanying land you purchased, knowing you have the right to perform these tasks things is important. That’s just one example of the many considerations that come into play, because in truth, a property’s history is often complex, and you never truly know what defects could exist in a property title. That is, until you have a title search completed by your title insurance company.
Understanding residential property title insurance
Residential property title insurance protects homebuyers from title defects, such as liens and encumbrances, fraud and forgery, unpaid taxes and mortgages and errors made in public records. It’s an important protection for what is typically one of the largest investments a person makes in their lifetime: purchasing a home. Imagine the challenges associated with finding out someone claims to own the property, like an undisclosed heir, after you’ve moved in. Or consider the legal nightmare of battling for the right to the home you bought when you find out the person who sold you the house never actually had the right to do so. Title insurance for residential property buyers protects that valuable purchase, so homeowners have peace of mind.
Understanding commercial property title insurance
Commercial real estate transactions typically involve a much larger monetary transaction than a residential property, as well as far more complicated titles, even though a commercial property title insurance policy covers many of the same issues as residential property title insurance. The stakes, it goes without saying, are high. As commercial property buyers move to protect their investments, it’s critical to know that there may be exceptions specific to the property itself such as easements and rights of way issues, zoning violations from previous owners or perhaps violations of building or environmental regulations. That’s why commercial transactions often involve a property survey and/or the business’s attorney or legal counsel reviewing the title commitment prior to closing. Such steps and review often result in commercial property owners electing to extend or expand the coverage.
Another difference between commercial property title insurance and residential title insurance is that title insurance for commercial properties typically does not compensate owners for issues outside of the property title. Commercial property insurance can cover these risks, which may include damage from fires, thefts, flooding and more. Best of all, commercial title insurance can protect your investment for as long as you own or have interest in your commercial property.
Commercial and residential property title insurance: protecting your investment
Whether you are considering residential property title insurance or commercial, both provide protection for life’s biggest investments, and both have options for purchase: a lender’s policy and/or an owner’s policy. When so much is at stake, it’s wise to carefully consider your coverage options so you can be confident your property and you are protected.